Business banking and credit for contractors

The cabinets rang up at $5,200 and you paid with the debit card in your wallet — the same card that buys groceries and covers the mortgage. It worked.

Nine months later your tax preparer is going down a bank statement asking whether a $312 charge at the home center was a customer's job or your own bathroom. You do not remember. You pay for that hour, and again for every deduction you drop because you cannot back it up.

Separating business money from personal money is a one-afternoon job you never have to do again.

The bookkeeper's hour and the deduction you drop

A mixed account has to be sorted line by line before anything can be categorized. A dedicated account is already sorted — every transaction in it is business by definition. If you pay a bookkeeper by the hour, that is the biggest lever you have over the invoice.

The deductions matter more. A charge in a business account with a matching receipt tells a clean story. The same charge between a car payment and a grocery run does not, and the burden of proving it is yours. No federal tax rule orders a sole proprietor to hold a separate account. The reason to open one is evidence, not compliance.

For an LLC, mixing the money is a legal problem, not just a mess

An LLC works because the company is a separate legal person from you. When someone sues, they generally reach company assets, not your house. Courts can set that separation aside — "piercing the corporate veil" — when the evidence says the company was never really run as a separate thing.

Commingling is one of the facts they weigh. Paying the mortgage out of the company account, running personal charges on the business card, or having no company account at all point the same direction. So do missing records and skipped formalities.

How much weight each factor carries varies by state, and some states require a showing of fraud or injustice before a court will pierce at all. A few say in statute that skipped formalities alone are not grounds for personal liability — which is why the money question does the heavy lifting. Ask a business attorney what operating properly looks like in your state.

What the bank asks for at the counter

Get the EIN yourself, free, from the IRS. The online application issues it immediately during posted hours, and any site charging for one is reselling a free form. A sole proprietor with no employees, no excise filings and no retirement plan is not required to have one — get it anyway. Form W-9 lets a sole proprietor with an EIN enter the EIN instead of the SSN, which keeps your Social Security number off a form a general contractor photocopies around the office.

That last row is federal customer due diligence: the bank must identify the people behind the company. The baseline is anyone owning 25 percent or more, and a bank may set a lower bar for a customer it treats as higher risk. Ask what the bank's form requires today — this area has moved more than once in recent years, most recently in early 2026.

Business credit is a second file, and it opens empty

Your personal credit file and your business file are separate records at different bureaus — Dun & Bradstreet, Experian and Equifax all run business products. A new company's business file is empty, which is why almost every early business card, equipment loan and line of credit is signed with a personal guarantee — you are still on the hook personally. That is normal, not a reason to skip the step, and it is why lenders keep pulling your personal report.

The file pays off later: net terms at the supply house instead of paying at the counter, better odds on equipment financing, one less obstacle when a general contractor asks for prequalification or a bond. Three things put entries in it:

• A D-U-N-S number, free from Dun & Bradstreet, and the key most business trade data is filed under. The free route can take several weeks; D&B sells a faster one.
• Supplier accounts that report. Ask each supply house whether it reports payment history to a business bureau. Many do not, and one that does is worth more to you.
• A business credit card, used and paid on time. Ask the issuer which bureaus it reports to.

Business scoring is not a personal FICO score. D&B's PAYDEX, the one supply houses quote most often, is weighted by dollar amount and reserves its top end for paying ahead of terms. Early payment moves it, where on a personal file it does nothing.

Size a line of credit on your worst overlap, not on your revenue

A business line of credit is not growth capital. It covers the weeks between paying for material and getting paid. Size it on what overlaps.

Those figures are an example; run your own worst month. Size against the peak overlap — $8,900 here — not the annual total. One and a half to two times that leaves room for a job to slip. That is a planning rule of thumb, not a lender's standard.

Interest is normally charged only on what you draw, which is the point of a line over a term loan. Compare the whole fee schedule — annual or maintenance fees, per-draw fees, a fee on the unused portion — not just the rate quoted on the phone.

The line stops working the moment it funds losses instead of timing. If the balance never returns to zero across a full cycle of finished jobs, the problem is underpriced work or uncollected invoices, and more credit makes it bigger.

Decide the gap before you borrow against it

Every uncovered dollar in that table was set by whether you took a deposit and when the balance came due. That is easy to settle on the walkthrough and easy to lose by the time paperwork goes out. In DoneQuote the deposit and payment terms travel with the job, so the schedule you worked out is the one the customer approves. Fewer uncovered weeks is cheaper than a bigger line.

The order to do it in

1. Get the EIN first. The bank and the DBA filing may both want it.
2. Open the checking account before your next big material buy, so the split starts at a clean boundary instead of mid-project.
3. Move the recurring charges over — insurance, fuel, phone, software, supplier autopay — and pay yourself by transfer, not by swiping the business card at the grocery store. If you have elected S-corporation treatment, part of what you take has to run through payroll as wages; ask your CPA what the split should be first.
4. Add a business card, run material through it and pay in full.
5. Apply for the line in a good quarter. Lenders look at recent deposits, and the month you need it most is the month you look worst on paper.